Energy Deal ‘Wrong,’ Ex-Enron Exec Says

A former Enron Corp. executive told a jury Thursday that he knew the disgraced energy company had made a bogus deal with Merrill Lynch & Co. in order to post fraudulent profits.

But the former finance executive, Daniel Boyle, said he had no part in the secret 1999 deal, in which Enron sold Merrill three electricity-generating barges floating off the Nigerian coast but promised to buy them back from the investment bank.

The trial of Boyle, one other former Enron executive and four former Merrill bankers centers on the prosecution’s charge that the sale of the barges was a sham that allowed Enron to book $12 million in illicit profit and fill an earnings gap before the end of 1999.

Boyle said under cross-examination by prosecutors that he found out about Enron’s promise to buy back the barges only shortly before the energy company repurchased them in June 2000 through a partnership run by Andrew Fastow, former chief financial officer of Enron.

Boyle, asked by prosecutor Matt Friedrich whether he knew Enron had illegally booked a profit from the sale because of the buyback, answered, “Yes I do.... It was wrong.”

By guaranteeing to repurchase the barges, Enron should have booked the deal as a loan under accounting rules.

Boyle testified that his involvement in the deal was limited to setting up seller financing of $21 million in financing that Enron provided to Merrill. The Wall Street firm put up $7 million of its money for the barges.

Defense lawyers have sought to portray the deal as a legitimate sale, arguing that Merrill assumed real risk when it agreed to buy the barges.

In addition to Boyle, former Enron accountant Sheila Kahanek and former Merrill bankers Daniel Bayly, Robert Furst, William Fuhs and James Brown are on trial. The six face charges of conspiracy and fraud in the case.